State & Local Corporate Welfare

State and local governments spend $80 billion a year trying to attract businesses away from each other, reports the New York Times. This is a giant zero-sum game, the paper suggests, and in fact may even slow growth in some areas by increasing the tax burden. The Times even admits that it has received $24 million in subsidies from the city and state of New York over the past 12 years.

Coincidentally, the Antiplanner is back in the air today to Boise, where I’ll be speaking to legislators about the follies of tax-increment financing (TIF), which is one of the main ways local governments subsidize corporations. Idaho cities and counties spend more than $50 million a year on TIF, which is a lot for a small state: nearly 20 percent of the property taxes collected in at least one county goes to TIF subsidies.

When Jerry Brown was mayor of Oakland, 10 percent of his salary came from TIF. Rather than be seduced by the money, he realized the folly of giving cities the power to effectively steal money from other tax entities. In 2011, he persuaded the California legislature to abolish TIF in California, the state that had invented it in 1952 and which up to that time was doing more TIF than all other states combined. Other states should follow suit.

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10 thoughts on “State & Local Corporate Welfare

  1. Dan

    Yes, there are entire books written on the subject. There are certain actors out there that benefit more than others from politicians’ largesse. Cabelas comes immediately to mind, since a town near me went ahead and upgraded the infra near the parcel that Cabelas walked away from…

    DS

  2. C. P. Zilliacus

    Dan wrote:

    Cabelas comes immediately to mind, since a town near me went ahead and upgraded the infra near the parcel that Cabelas walked away from…

    Dan, I recall reading recently that a company that competes with Cabelas, Bass Pro Shops, plays the same game.

    I won’t be spending my money at either anytime soon.

  3. irandom

    Actually, Cabela’s is rethinking tax incentives.

    “We have come to the conclusion that the places that are most likely to offer incentives are the places we are least likely to want to build,” Castor says.

    http://www.theatlanticcities.com/jobs-and-economy/2012/08/why-have-so-many-cities-and-towns-given-away-so-much-money-bass-pro-shops-and-cabelas/2906/

    bennett Reply:

    Duh, but money talks. We’ve been experiencing this in Austin for some time now. Everybody want’s to come to Austin, but Buda or Round Rock will give you cash to move there. Close counts, and the likes of Dell and Cabela’s can say “we’re in Austin, more or less.” If Cabela’s actually built where they wanted they’d be in Dallas not Grapevine, or Austin not Kyle. But where is EVERY single Cabela’s or Bass Pro???? Out on the fringe where town that pays.

    Another good example of the private sector and politicians fleecing the tax payer is in the construction of pro sports facilities. Just ask the fans of the Marlins. They ponied up serious cash when the owner loaded up the team with talent. As soon as he got his stadium, whoosh!!! Fire sale. Look for the Marlins to be the worst team in MLB next year despite having one of the nicest facilities (thus making the owner’s assets several orders of magnitude more valuable). Miami got hosed.

    Sandy Teal Reply:

    Cabellas plays in the minor leagues of tax payer fleecing compared to sports teams. Sports teams don’t even bother with tax incentives. They get the city to buy the land, build the stadium, give the sports team all the parking and vendor revenue, and build public transit extensions for use solely for the sports events.

    But the coup de grace is that when a sports team gets the brand new stadium from the taxpayers, THEY RAISE TICKET PRICES ON THOSE VERY TAXPAYERS. Now that is world-class tax payer fleecing.

    Dan Reply:

    Speakling of corporate welfare, I read recently that approximately half of your cable bill goes to covering the sports franchises for sports coverage.

    Can you imagine what would happen to revenue if this subsidy model collapsed and sports fans paid full price to consume that product? That’s right: revenue would plummet, stadiums would sit half-empty, players salaries would crash, and those stadiums bennett describes would become another adaptive re-use project.

    DS

    bennett Reply:

    This makes sense though. Since the advent of the DVR sports is one of the last bastions of live TV. It’s the only place where advertisers can still reach the cable audience. All other programming enables viewers to skip ads and watch at their leisure. Sports is where the $$$ is made on TV because it’s the only thing people will sit through ads to watch anymore.

    p.s. I love sport, but do not own cable. Most of what I watch is on network TV or I’m watching at the sports bar.

    C. P. Zilliacus Reply:

    bennett wrote:

    Duh, but money talks. We’ve been experiencing this in Austin for some time now. Everybody want’s to come to Austin, but Buda or Round Rock will give you cash to move there. Close counts, and the likes of Dell and Cabela’s can say “we’re in Austin, more or less.” If Cabela’s actually built where they wanted they’d be in Dallas not Grapevine, or Austin not Kyle. But where is EVERY single Cabela’s or Bass Pro???? Out on the fringe where town that pays.

    There is a Bass Pro Shops in Anne Arundel County, Maryland, off of Md. 295 (Baltimore-Washington Parkway) near its interchange with Md. 100 (a partial “outer beltway” around south side of Baltimore). It is located in a large discount mall once owned by the Mills Corporation. Strangely, I am not aware that it got any subsidies from the county (it may have, but I think I would have heard about it if subsidies had been granted).

    Another good example of the private sector and politicians fleecing the tax payer is in the construction of pro sports facilities.

    I strongly agree. In the case of the Washington Redskins, the team built a new stadium with its own money in Landover, Prince George’s County, Maryland – but the taxpayer contributed a new interchange and other transportation improvements, and a Metrorail stop. Those are not cheap.

    The Baltimore Ravens (f/k/a the Cleveland Browns) got a new stadium in addition to some highway improvements and a light rail stop, all courtesy of state taxpayers.

    Just ask the fans of the Marlins. They ponied up serious cash when the owner loaded up the team with talent. As soon as he got his stadium, whoosh!!! Fire sale.

    Happened years ago with the Baltimore Orioles. Corporate raider and Republic Party bigshot Eli Jacobs bought the franchise, then his finances fell apart he went into bankruptcy, and he was forced to sell a team that got much more valuable with the new ballpark.

    Look for the Marlins to be the worst team in MLB next year despite having one of the nicest facilities (thus making the owner’s assets several orders of magnitude more valuable). Miami got hosed.

    Happened in plenty of other cities as well.

  4. sprawl

    In Portland they have The Nines that received $72.5 million in New Market Tax Credits. Tax breaks intended to revive America’s poor neighborhoods. By way of the federal government

    The Nines are in the muddle of downtown Portland in what has been touted for decades as a successful area thanks to light rail.

    They also received $16.9 million in city loans by way of the PDC and the urban renewal area. Which they have not made a payment on sense 2009. The Nines is a high end hotel, that was going to rent rooms out for up to $250.00 a night and now discount their rooms for $99.00. Driving the cost of all hotel rooms down in Portland.
    .

    In 2008 the Mayor of Portland said.
    The Nines, Katz said, “saved Macy’s. Without it, it would never have happened.”

    Macy’s is on the bottom 3 floors replacing Meier & Frank department store that use to fill the whole building.

    It may have been better if it never happened.

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